Ifrs Vs Us Gaap

18187 bd IFRS US GAAP
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Audit
IFRSs and US GAAP

A pocket comparison
March 2007
An IAS Plus guide
. .
Audit Tax Consulting Financial Advisory
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Contacts
Global IFRS leadership team
IFRS global office
Global IFRS leader
Ken Wild
kwild@deloitte.co.uk
IFRS centres of excellence
Americas
D.J. Gannon
iasplusamericas@deloitte.com
Asia-Pacific
Hong Kong
Stephen Taylor
iasplus@deloitte.com.hk
Melbourne
Bruce Porter
iasplus@deloitte.com.au
Europe-Africa
Johannesburg
Graeme Berry
iasplus@deloitte.co.za
London
Veronica Poole
iasplus@deloitte.co.uk
Copenhagen
Jan Peter Larsen
dk_iasplus@deloitte.dk
Paris
Laurence Rivat
iasplus@deloitte.fr
Deloittes www.iasplus.com website provides comprehensive information about

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IFRSs and US GAAP

The path to convergence
The Norwalk agreement
In October 2002, following a joint meeting at the offices of the US Financial
Accounting Standards Board (FASB) in Norwalk, Connecticut, the FASB and the
International Accounting Standards Board (IASB) formalised their commitment
to the convergence of generally accepted accounting principles in the United
States (US GAAP) and International Financial Reporting Standards (IFRSs) by
issuing a memorandum of understanding (commonly referred to as the Norwalk
agreement). The two Boards pledged to use their best efforts to:
make their existing financial reporting standards fully compatible as soon as is
practicable; and
coordinate their future work programmes to ensure that once achieved,
compatibility is maintained.
Compatible does not mean word-for-word identical standards, but rather
means that there are no significant differences between the two sets of
standards.
Road map for convergence 2006-2008

In February 2006, the IASB and the FASB released a roadmap which identified
short- and long-term convergence projects.
Short-term projects
For the projects identified as short-term, the goal by 2008 is to reach a
conclusion about whether major differences in those few focussed areas should
be eliminated through one or more short-term standard-settting projects and,
if so, to complete or substantially complete work in those areas. These topics
for short-term convergence include:
IASB
Borrowing costs (remove expense option)
Joint ventures (remove proportionate consolidation option for jointly
controlled entities and clarify definition)
FASB
Fair value option for financial instruments (issued as FAS 159 in February 2007)
Investment properties
Research and development
Subsequent events
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The path to convergence
Joint
Impairment
Income taxes
Long-term projects
The goal for 2008 for the projects listed below is to have made significant
progress in the following areas identified for improvement:
Business combinations
Conceptual framework
Fair value measurement guidance (FAS 157 used by IASB as basis for
Discussion Paper)
Financial statement presentation
Post-retirement benefits
Revenue recognition
Liabilities and equity
Financial instruments
Derecognition
Consolidations and Special Purpose Entities
Intangible assets
Leases
More specific goals have been set for each individual project. The objective is to
provide a timeframe for convergence efforts in the context of both the objective
of removing the need for IFRS reconciliation requirements by 2009 and the
existing agendas of the FASB and the IASB.
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Comparison of IFRSs and

US GAAP
The table on the following pages sets out some of the key differences between
IFRSs and US GAAP as of 28 February 2007.
The summary does not attempt to capture all of the differences that exist or that
may be material to a particular entitys financial statements. Our focus is on
differences that are commonly found in practice.
The significance of these differences and others not included in this list will
vary with respect to individual entities depending on such factors as the nature
of the entitys operations, the industry in which it operates, and the accounting
policy choices it has made. Reference to the underlying accounting standards
and any relevant national regulations is essential in understanding the specific
differences.
The rate of progress being achieved by both the FASB and the IASB in their
convergence agendas means that a comparison between standards can only
reflect the position at a particular point in time. You can keep up to date on
later developments via our IAS Plus website, which sets out the IASB agendas
and timetables, as well as project summaries and updates.
Abbreviations used in this publication are as follows:

CGU
Cash generating unit
FAS
Financial Accounting Standard (US)
FASB
Financial Accounting Standards Board (US)
FIN
FASB interpretation (US)
GAAP
Generally Accepted Accounting Principles
GAAS
Generally Accepted Auditing Standards
IASB
International Accounting Standards Board
IAS(s)
International Accounting Standard(s)
IFRS(s)
International Financial Reporting Standard(s)
R&D
Research and development
SEC
Securities and Exchange Commission (US)
SPE(s)
Special Purpose Entity(ies)
End-note references indicated in superscript in the comparison table are

located on page 31.
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Comparison of IFRSs and US GAAP
IAS/
IFRS
Topic
IFRSs
US GAAP
General
approach
More principlesbased standards

with limited
application guidance.
More rules-based
standards with specific
application guidance.
IFRS 1
First-time
adoption
General principle is
full retrospective
application of IFRSs in
force at the time of
adoption, unless the
specific exceptions
and exemptions in
IFRS 1 permit or
require otherwise.
No specific standard.
Practice is generally full
retrospective application
unless the transitional
provisions in a specific
standard require
otherwise.
IFRS 1
General
Certain exceptions and exemptions at transition

in accordance with IFRS 1 can give rise to
differences between IFRSs and US GAAP in areas
that would not normally give rise to such
differences.
IFRS 2
Modified grant date

Date for
method.
measuring
share-based
payments to
non-employees
Earlier of counterparty's
commitment to perform
(where a sufficiently large
disincentive for nonperformance exists) or
actual performance.
IFRS 2
Use of historical Not permitted.

volatility or
industry index
measurement
for non-public
entities when
it is not
practicable
to estimate
expected
volatility
Permitted.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IFRS 2
Modification
of an award
by change in
performance
condition
(improbable
to probable)
(Type III
modifications)
Expense determined
based on the grant
date fair value.
Expense determined
based on fair value at the
modification date.
IFRS 2
Share-based
payments with
graded vesting
features
Charge is recognised
on an accelerated
basis to reflect the
vesting as it occurs.
An accounting policy
choice exists for awards
with a service condition
only to either: (a) amortise
the entire grant on a
straight-line basis over the
longest vesting period, or
(b) recognise a charge
similar to IFRSs.
IFRS 2
Balance sheet Focus on whether the

classification of award can be cash
settled.
share-based
payment
arrangements
IFRS 3
Date on which
marketable
equity
securities
issued as
consideration
in a business
combination
are measured1
Acquisition date (date Within a reasonable

period before and after
on which control
the date that the terms
passes).
of the acquisition are
agreed to and
announced.
IFRS 3
Date on which
contingent
consideration
is recorded
(as part of
consideration)
Acquisition date (if

the amount is
probable and can be
measured reliably).
More detailed
requirements that may
result in more sharebased arrangements
being classified as
liabilities.
Generally when
contingency is resolved.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IFRS 3
Recognising a
liability for a
planned postacquisition
restructuring1
Only if acquiree has

already recognised a
provision under
IAS 37.
Can be recognised if the

restructuring relates to
the acquired business
and certain conditions
are met.
IFRS 3
Measuring
minority
interest1
Minority's percent of
fair values.
Minority interest
measured at fair value
if entity consolidated
under the risk and
rewards model (FIN 46);
otherwise, it is recorded
at proportion of historical
cost.
IFRS 3
Purchased inprocess R&D1
Can be recognised as
an acquired finite life
intangible asset
(amortised), or as part
of goodwill if not
separately measurable
(not amortised but
subject to an annual
impairment test).
Determine the fair value

of in-process R&D and
expense immediately
unless it has an
alternative future use.
IFRS 3
Excess of fair
Recognise
value of net
immediately as a gain.
assets acquired
over the
acquisition cost1
Allocate on a pro rata

basis to reduce the
carrying amounts of
certain acquired nonfinancial assets, with any
excess recognised as an
extraordinary gain.
IFRS 3
Combinations
of entities
under common
control1
Outside the scope of Pooling of interests

IFRS 3 though merger method is required.
accounting (pooling
of interests method)
is generally used in
practice.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IFRS 4
Rights and
obligations
under
insurance
contracts2
IFRS 4 addresses
recognition and
measurement in only
a limited way. It is an
interim standard
pending completion
of a comprehensive
project.
Several comprehensive
pronouncements and
other comprehensive
industry accounting
guides have been
published.
IFRS 4
Derivatives
embedded in
insurance
contracts
An embedded
derivative whose
characteristics and
risks are not closely
related to the host
contract but whose
value is
interdependent with
the value of the
insurance contract
need not be
separated out and
accounted for as a
derivative.
An embedded derivative
whose characteristics and
risks are not closely
related to the host
contract must be
accounted for separately.
IFRS 5
Definition of a
discontinued
operation
A reportable business
or geographical
segment or major
component thereof.
A component which may

be an operating
segment, a reporting
unit, a subsidiary, or an
asset group (less
restrictive than the IFRS 5
definition).
IFRS 5
Definition of a
discontinued
operation
continuing
involvement
Not addressed.
Disposing entity should

have no continuing cash
flows representative of
significant continuing
involvement.
IFRS 5
Presentation of Post-tax income or

loss is required on the
discontinued
face of the income
operations
statement.
Pre-tax and post-tax

income or loss are
required on the face of
the income statement.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IFRS 8
Disclosure of
non-current
assets
attributable to
segments3
Include intangible
assets.
Exclude intangible assets.
IFRS 8
Disclosure of
measure of
liabilities3
Required.
Not required.
IFRS 8
Matrix form
of organisation
identification
of segments3
Operating segments
are identified on the
basis of the core
principle.
Operating segments are

identified based on
products and services.
IAS 1
Financial
statement
presentation4
Specific line items

required.
Certain standards require

specific presentation of
certain items.
Public companies are
subject to SEC rules and
regulations, which require
specific line items.
IAS 1
Comparative
prior year
financial
statements4
One year comparative No specific requirement

financial information under US GAAP to
present comparatives.
is required.
Generally at least one
year of comparative
financial information is
presented. Public
companies are subject to
SEC rules and regulations,
which generally require
two years of comparative
financial information for
income statement,
statements of equity and
cash flows.
IAS 1
Reporting
Can be presented as a As for IFRSs. In addition,
it can be presented with
comprehensive separate financial
the income statement.
income4
statement or in the
statement of changes
in equity.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IAS 1
Departure from
a standard
when
compliance
would be
misleading
Permitted in
extremely rare
circumstances to
achieve a fair
presentation. Specific
disclosures are
required.
Not directly addressed in

US GAAP literature,
although an auditor may,
under Generally
Accepted Auditing
Standards (GAAS) rule
203, conclude that by
applying a certain GAAP
requirement the financial
statements are
misleading, thereby
allowing for an
override.
IAS 1
Classification
of liabilities on
refinancing4
Non-current if
refinancing is
completed before
balance sheet date.
Non-current if
refinancing is completed
before date of issuance
of the financial
statements.
IAS 1
Classification
of liabilities due
on demand
due to violation
of debt
covenant4
Non-current if the
lender has granted a
12-month waiver
before the balance
sheet date.
Non-current if the lender

has granted a waiver for
a period greater than one
year (or operating cycle,
if longer) before the
issuance of the financial
statements or when it is
probable that the
violation will be corrected
within the grace period,
if any, prescribed in the
long-term debt
agreement.
IAS 2
Reversal of
inventory
write-downs
Required, if certain
criteria are met.
Prohibited.
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IAS/
IFRS
Topic
IFRSs
IAS 2
Measuring
inventory at
net realisable
value even if
above cost
Permitted, but based on

Permitted only for
producers inventories a specific product
(precious metals).
of agricultural and
forest products and
mineral ores and for
broker-dealers
inventories of
commodities.
IAS 2
Method for
determining
inventory cost
LIFO is prohibited.
IAS 7
Classification
of interest
received and
paid in the
cash flow
statement4
Interest received may Must be classified as an

operating activity.
be classified as
operating or investing.
Inclusion of
bank overdrafts
in cash for cash
flow statement
presentation
purposes
Included if they form

an integral part of an
entity's cash
management.
IAS 7
10
US GAAP
LIFO is permitted.
Interest paid may be

classified as operating
or financing.
Excluded.
Cost recovery
IAS 11 Method of
accounting for method.
construction
contracts when
the percentage
of completion
cannot be
determined
Completed contract
method.
IAS 12 Classification
Always non-current.
of deferred tax
assets and
liabilities5
Classification is split
between current and
non-current components
based on the classification
of the underlying asset
or liability, or on the
expected reversal of items
not related to an asset
or liability.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IAS 12 Recognition of
deferred tax
assets5
Recognise the
probable portion.
Recognise in full and

then reduce by a
valuation allowance, for
the non-probable
portion.
IAS 12 Subsequent
recognition of
a deferred tax
asset after a
business
combination5
First reduce goodwill

to zero, any excess
credited to net profit
or loss.
First reduce goodwill to

zero, then any other
non-current intangible
assets to zero. Any
excess credited to net
profit or loss.
IAS 12 Reconciliation
of actual and
expected tax
expense5
Required for all

entities applying
IFRSs; expected tax
expense is computed
by applying the
applicable tax rate(s)
to accounting profit,
disclosing also the
basis on which the
applicable tax rate(s)
is(are) computed.
Required for public

companies only;
expected tax expense is
computed by applying
the domestic federal
statutory tax rates to
pre-tax income from
continuing operations.
Non-public companies
must disclose the nature
of the reconciling items
but not amounts.
IAS 12 Calculation of
tax benefits
related to
share-based
payments5
Deferred tax is
computed based on
the tax deduction for
the share-based
payment under the
applicable tax law
(i.e. intrinsic value).
Deferred tax is computed

based on the GAAP
expense recognised and
trued up or down at
realisation of the tax
benefit/deficit.
IAS 12 Impact of
temporary
differences
related to
intercompany
profits5
Deferred tax effect is

recognised at the
buyer's tax rate.
Deferred tax effect is

recognised at the seller's
tax rate, as if the
transaction had not
occurred.
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IAS/
IFRS
12
Topic
IFRSs
US GAAP
IAS 12 Initial
recognition
exemption5
No similar exemption.
Deferred tax not
recognised for taxable
temporary differences
that arise from the
initial recognition of
an asset or liability in
a transaction that is
(a) not a business
combination, and (b)
does not affect
accounting profit or
taxable profit. Nor are
changes in this
unrecognised
deferred tax asset or
liability subsequently
recognised.
IAS 12 Other specific

exemptions to
the basic
principle that
deferred tax is
recognised for
all temporary
differences5
Does not have all the

exemptions
comparable to those
in US GAAP.
US GAAP has three

additional exemptions
from providing deferred
taxes that differ from
IFRSs, including:
leveraged leases,
intragroup inventories,
and differences related to
assets and liabilities that
are remeasured from the
local currency into the
functional currency using
historical exchange rates
and that result from
(1) changes in exchange
rates or (2) indexing for
tax purposes.
IAS 12 Tax rate for

measuring
deferred tax
assets and
liabilities6
Use enacted or
substantively
enacted tax rate.
Use enacted tax rate.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IAS 12 Measurement
of deferred
tax on
undistributed
earnings of a
subsidiary5
Must use rate

applicable to
undistributed profits.
Generally, US GAAP
requires the use of the
higher of the distributed
and the undistributed
rates.
IAS 12 Changes in
deferred taxes
that were
originally
charged or
credited to
equity
(backward
tracing) 5
The tax effects of

items credited or
charged directly to
equity during the
current year are
allocated directly to
equity. A deferred tax
item originally
recognised by a
charge or credit to
shareholders equity
may change either
from changes in
assessments of
recovery of deferred
tax assets or from
changes in tax rates,
laws, or other
measurement
attributes. Consistent
with the initial
treatment, IAS 12
requires that the
resulting change in
deferred taxes also be
charged or credited
directly to equity.
Backward tracing is
prohibited. Subsequent
changes are allocated to
continuing operations.
IAS 12 Uncertain tax

positions5
Accounting for tax

consequences reflects
managements
expectations.
FIN 48 prescribes a
methodology which is
based on the probability
of a tax position being
sustained.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IAS 12 Changes in
pre-acquisition
tax liabilities of
acquired
entities5
Generally revise
purchase price
allocation if within
the one year
allocation window.
Otherwise record
effect in income
statement.
Adjust purchase price

allocation irrespective of
period lapsed since
acquisition.
IAS 14 Basis of
reportable
segments3
Lines of business and

geographical areas.
Components for which

information is reported
internally to top
management, which may
or may not be based on
lines of business or
geographical areas.
IAS 14 Types of
segment
disclosures3
Required disclosures
for both primary
and secondary
segments.
Only one basis of

segmentation, although
certain enterprise-wide
disclosures are required
such as revenue from
major customers and
revenue by country.
IAS 14 Accounting
basis for
reportable
segments3
Amounts are based

on IFRS measures.
Amounts are based on

whatever basis is used
for internal reporting
purposes. These amounts
should be reconciled to
the relevant amounts
contained in the financial
statements.
IAS 14 Segment result3 Segment result

defined.
14
No definition of segment
result.
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IAS/
IFRS
Topic
IFRSs
US GAAP
IAS 16 Basis of
measurement
for property,
plant and
equipment
May use either

revalued amount or
historical cost.
Revalued amount is
fair value at date of
revaluation less
subsequent
accumulated
depreciation and
impairment losses.
At historical cost.
Revaluations prohibited.
IAS 16 Major
inspection or
overhaul costs
Generally accounted Either expensed as

for as part of the cost incurred, deferred and
amortised over the
of an asset.
period until the next
overhaul, or accounted
for as part of the cost of
an asset.
IAS 16 Measuring the

residual value
of property,
plant and
equipment
Current net selling

price assuming the
asset were already of
the age and in the
condition expected at
the end of its useful
life.
Generally the discounted

present value of expected
proceeds on future
disposal.
Residual value may be Residual value may only

adjusted upwards or be adjusted downwards.
downwards.
IAS 17 Leases of land
and buildings7
Land and buildings

elements are
considered separately
unless the land
element is not
material.
Land and building

elements are generally
accounted for as a single
unit, unless land
represents more than
25% of the total fair
value of the leased
property.
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Page 16
IAS/
IFRS
Topic
IAS 17 Present value

of minimum
lease
payments7
IFRSs
US GAAP
Generally would use

the rate implicit in the
lease to discount
minimum lease
payments.
Lessors must use the

implicit rate to discount
minimum lease payments.
Lessees generally would
use the incremental
borrowing rate to
discount minimum lease
payments unless the
implicit rate is known and
is the lower rate.
IAS 17 Recognition of a The gain is recognised Generally, the gain is

gain on a sale immediately.
amortised over the lease
and leaseback
term.
transaction
where the
leaseback is an
operating lease7
IAS 17 Recognition of The gain is recognised The gain is recognised
a gain on a sale over the lease term.
over the useful life of the
and leaseback
asset.
where the
leaseback is a
finance lease7
IAS 18 Revenue
recognition
guidance8
General principles are

consistent with US
GAAP, but IFRSs
contain limited
detailed or industryspecific guidance.
More specific guidance,

particularly with respect
to multiple element
arrangements and
industry-specific issues
(for example, software
revenue recognition). In
addition, public
companies must follow
more detailed guidance
provided by the SEC.
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Page 17
IAS/
IFRS
Topic
IFRSs
US GAAP
IAS 19 Termination
benefits9
No distinction
between special
and other termination
benefits. Termination
benefits recognised
when the employer
is demonstrably
committed to pay.
Recognise special
(one-time) termination
benefits generally when
they are communicated
to employees unless
employees will render
service beyond a
minimum retention
period, in which case
the liability is recognised
ratably over the future
service period. Recognise
contractual termination
benefits when it is
probable that employees
will be entitled and the
amount can be
reasonably estimated.
Recognise voluntary
termination benefits
when the employee
accepts the offer.
IAS 19 Recognising
actuarial gains
and losses
directly in
equity when
they arise
Permitted.
Required.
Not permitted.
IAS 19 Recycling in
profit or loss of
actuarial gains
and losses
previously
recognised in
equity
Subsequently these
amounts will be
reclassified from other
comprehensive income
and recognised in profit
or loss as components of
net periodic benefit cost.
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Page 18
IAS/
IFRS
18
Topic
IFRSs
US GAAP
IAS 19 Measurement
of gain or loss
on curtailment
of a benefit
plan
A curtailment gain or
loss comprises (a) the
change in the present
value of the defined
benefit obligation, (b)
any resulting change
in fair value of the
plan assets, and (c) a
pro rata share of any
related actuarial gains
and losses,
unrecognised
transition amount,
and past service cost
that had not
previously been
recognised.
Similar to IFRSs. However,

some detailed differences
may arise in respect of:
unrecognised actuarial
gains and losses,
unrecognised transition
amount and past service
costs.
IAS 19 Timing of
recognition of
gains/losses on
curtailment of
a benefit plan
Both curtailment
gains and losses are
recognised when the
entity is demonstrably
committed and a
curtailment has been
announced.
A curtailment loss is
recognised when it is
probable that a
curtailment will occur and
the effects are reasonably
estimable. A curtailment
gain is recognised when
the relevant employees
are terminated or the
plan suspension or
amendment is adopted,
which could occur after
the entity is demonstrably
committed and a
curtailment is announced.
past service
cost related to
benefits that
have vested
Recognised
immediately.
Generally amortised over

the remaining service
period or life expectancy.
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Page 19
IAS/
IFRS
Topic
IFRSs
IAS 19 Presentation of Presented as an offset

or increase to the
past service
defined benefit
cost
obligation.
US GAAP
Presented within other
comprehensive income
with unrecognised
actuarial gains and
losses.
IAS 19 Multi-employer
plan that is a
defined benefit
plan
Should be accounted Accounted for as a

defined contribution
for as a defined
plan.
benefit plan if the
required information
is available. Otherwise
as a defined
contribution plan.
IAS 19 Limitation on
recognition of
pension assets
Pension assets cannot No limitation on the

amount that can be
be recognised in
excess of the net total recognised.
of unrecognised past
service cost and
actuarial losses plus
the present value of
benefits available
from refunds or
reduction of future
contributions to the
plan.
IAS 21 Foreign
currency
translation
reserve
accounting for
dividends
considered to
be returns of
investment
No recycling of reserve to
Accounted for as a
disposal of part of the the income statement.
foreign investment
and relevant part of
the reserve is recycled
to the income
statement.
19
9/3/07
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Page 20
IAS/
IFRS
Topic
IFRSs
IAS 23 Borrowing
Capitalisation is an
costs related to available accounting
assets that take policy choice.
a substantial
time to
complete10
IAS 23 Types of
borrowing
costs eligible
for
capitalisation
Capitalisation is
mandatory.
Generally only includes

Includes interest,
certain ancillary costs, interest.
and exchange
differences that are
regarded as an
adjustment of
interest.
IAS 23 Income on
Reduces borrowing
temporary
costs eligible for
investment of capitalisation.
funds
borrowed for
construction of
an asset
Does not reduce

borrowing costs eligible
for capitalisation except
in certain very limited
circumstances.
IAS 27 Basis for

consolidation
Approach depends on
the type of entity. For
voting interests, entities
generally look to majority
voting rights. For variable
interest entities, look to a
risks and rewards model.
11,12
Control (look to
governance and risk
and benefits).
IAS 27 Special purpose Consolidate if

entities11,12
controlled.
Generally follow the
same principles as for
commercial entities in
determining whether
or not control exists.
20
US GAAP
If SPE is not a qualifying

SPE (QSPE)13, then
assessed whether within
the scope of risks and
rewards model for
variable interest entities.
Otherwise, apply
guidance based on
majority voting interests.
QSPEs are not
consolidated.
9/3/07
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Page 21
IAS/
IFRS
Topic
IFRSs
US GAAP
IAS 27 Different
reporting dates
of parent and
subsidiaries
Reporting date
difference cannot be
more than three
months. Must adjust
for any significant
intervening
transactions.
Reporting date difference

generally should not be
more than three months.
Must disclose effects of
any significant
intervening transactions.
May adjust for such
transactions.
IAS 27 Different
accounting
policies of
parent and
subsidiaries11
Must conform
policies.
No specific requirement.
IAS 27 Presentation of In equity.

minority
interest11
Outside of equity, within

the mezzanine area
between liabilities and
equity.
IAS 28 Different
reporting dates
of investor and
associate
Reporting date
difference cannot be
more than three
months. Must adjust
for any significant
intervening
transactions.
Reporting date difference

generally should not be
more than three months.
Must disclose effects of
any significant
intervening transactions.
May adjust for such
transactions.
IAS 28 Different
accounting
policies of
investor and
associate
Must conform
policies.
SEC staff does not

require policies to be
conformed provided that
policies are in accordance
with US GAAP.
IAS 29 Adjusting
financial
statements of
an entity that
operates in a
hyperinflationary economy
Adjust using a general Adjust the financial

statements as if the
price level index
reporting currency of the
before translating.
parent was the entitys
functional currency.
21
9/3/07
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Page 22
IAS/
IFRS
22
Topic
IFRSs
US GAAP
IAS 31 Investments in
joint ventures
May use either the

equity method or
proportionate
consolidation.
Generally use the equity

method (except in
construction and oil and
gas industries).
IAS 32 Classification of
convertible
debt
instruments
with conversion
option fixed
amount of cash
for fixed
number of
shares (a
conventional
instrument)
Split the instrument

into its liability and
equity components
and measure the
liability at fair value
with the equity
component
representing the
residual.
Equity component will

arise only for instruments
with a beneficial
conversion feature that
exists at the inception of
the instrument.
IAS 32 Offsetting
amounts due
from and owed
to two different
parties
Prohibited.
Required when and
only when a legally
enforceable right and
the intention to settle
net exist.
IAS 33 Disclosures of
earnings per
share (EPS)
Basic and diluted

income from
continuing operations
per share and net
profit or loss per
share.
Basic and diluted income

from continuing
operations, discontinued
operations, extraordinary
items, cumulative effect
of a change in accounting
policy, and net profit or
loss per share.
IAS 33 Calculation of
year-to-date
(YTD) diluted
EPS14
Apply the treasury

stock method on a
YTD basis, that is,
do not average the
individual interim
period calculations.
Average the individual

interim period
incremental shares.
9/3/07
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Page 23
IAS/
IFRS
Topic
IFRSs
US GAAP
IAS 33 Contracts that Assume always that

may be settled the contracts will be
in ordinary
settled in shares.
shares or in
cash, at issuers
option14
Include based on
rebuttable presumption
that the contracts will be
settled in shares.
IAS 34 Interim
reporting
revenue and
expense
recognition
Interim period is a
discrete reporting
period (with certain
exceptions).
Interim period is an
integral part of the full
year (with certain
exceptions).
IAS 36 Impairment
methodology
for long-term
assets (other
than goodwill)
that are subject
to amortisation
Impairment is
recorded when an
asset's carrying
amount exceeds the
higher of the asset's
value-in-use
(discounted present
value of the asset's
expected future cash
flows) and fair value
less costs to sell.
Impairment is recorded
when an asset's carrying
amount exceeds the
expected future cash
flows to be derived from
the asset on an
undiscounted basis.
IAS 36 Measurement
of impairment
loss for longterm assets
(other than
goodwill) that
are subject to
amortisation
Based on the
recoverable amount
(the higher of the
asset's value-in-use
and fair value less
costs to sell).
Based on fair value,

generally based on
discounted cash flows.
IAS 36 Level of
impairment
testing for
goodwill
Cash generating unit

(CGU) the lowest
level at which
goodwill is monitored
for internal
management
purposes. This level
cannot be larger than
a segment.
Reporting unit either

an operating segment or
one organisational level
below.
23
9/3/07
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Page 24
IAS/
IFRS
Topic
IAS 36 Calculating
impairment of
goodwill
IFRSs
US GAAP
Two steps:
One-step: compare
recoverable amount
1. Compare fair value of
of a CGU (higher of
the reporting unit with
(a) fair value less costs
its carrying amount
to sell and (b) valueincluding goodwill.
in-use) to carrying
If fair value is greater
amount.
than carrying amount,
no impairment (skip
step 2).
2. Compare implied fair
value of goodwill,
which is determined
based on a
hypothetical purchase
price allocation, with
its carrying amount,
recording an
impairment loss for
the difference.
24
IAS 36 Calculating
impairment of
indefinite-life
intangible
assets
Calculated by comparing
Calculated by
their fair value to
comparing
carrying amount.
recoverable amount
(higher of (a) fair
value less costs to sell
and (b) value-in-use)
to carrying amount.
IAS 36 Subsequent
reversal of an
impairment
loss
Required for all

assets, other than
goodwill, if certain
criteria are met.
Prohibited.
9/3/07
1:09 pm
Page 25
IAS/
IFRS
Topic
IAS 37 Measurement
of provisions9
IFRSs
US GAAP
Best estimate to settle

the obligation, which
generally involves the
expected value
method.
Most probable outcome

to settle the obligation.
If no one item is more
likely than another, use
the low end of the range
of possible amounts.
Discounting required. Unless specifically

permitted by an
accounting standard,
discounting is only
allowed where the timing
and amount of the future
cash flows is fixed and
determinable.
IAS 37 Measurement
of decommissioning
provisions9
Use the current, riskadjusted rate to

discount the provision
when initially
recognised. Adjust
the rate at each
reporting date.
Use the current, creditadjusted risk-free rate to

discount the provision
when initially recognised.
Do not adjust the rate in
future periods.
restructuring
provisions9
Recognise if a
detailed formal plan
is announced or
implementation of
such a plan has
started.
Recognise when a
transaction or event
occurs that leaves an
entity little or no
discretion to avoid the
future transfer or use
of assets to settle the
liability. An exit or
disposal plan, by itself,
does not create a present
obligation to others for
costs expected to be
incurred under the plan.
25
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Page 26
IAS/
IFRS
26
Topic
IFRSs
US GAAP
IAS 37 Disclosures that

may prejudice
seriously the
position of the
entity in a
dispute9
"In extremely rare

cases" amounts and
details need not be
disclosed, but
disclosure is required
of the general nature
of the dispute and
why the details have
not been disclosed.
Disclosure is required.
IAS 38 Development
costs15
Capitalise, if certain
criteria are met.
Expense as incurred
(except for certain
website development
costs and certain costs
associated with
developing internal
use software).
IAS 38 Revaluation of
intangible
assets
Permitted only if the Prohibited.

intangible asset trades
in an active market.
IAS 39 General
A more extensive list of differences is included in

the publication iGAAP 2007 Financial
instruments: IAS 32, 39 and IFRS 7 explained.
IAS 39 Option to
designate any
financial asset
or financial
liability to be
measured at
fair value
through profit
or loss
Option allowed at iniitial

Option is allowed if
one of three criteria is recognition. Criteria in
IFRSs do not apply.
met.
IAS 39 Investments in
unlisted equity
instruments
Measured at fair value Measured at cost less

if reliably measurable; other than temporary
otherwise at cost.
impairments, if any.
9/3/07
1:09 pm
Page 27
IAS/
IFRS
Topic
IAS 39 Foreign
exchange
differences on
available-forsale debt
instruments
IFRSs
US GAAP
Changes in fair value

resulting from
movements in
exchange rates are
reflected in the
income statement as
exchange differences.
Changes in fair value

resulting from
movements in exchange
rates are reflected in
equity and recycled to
income statement when
instrument is sold.
IAS 39 Reclassification Prohibited.

of financial
instruments
into or out of
the trading
category
Permitted but expected

to be rare.
IAS 39 Classification
of financial
assets as heldto-maturity
Puttable debt
instruments cannot
be classified as held
to maturity.
No such prohibition
exists.
IAS 39 Effect of selling

investments
classified as
held-tomaturity
Prohibited from using

held-to-maturity
classification for the
next two years.
Prohibited from using

held-to-maturity
classification. SEC
indicates that prohibition
is generally for two years.
IAS 39 Subsequent
reversal of an
impairment
loss recognised
in the income
statement
Required for loans

and receivables, heldto-maturity, and
available-for-sale debt
instruments, if certain
criteria are met.
Prohibited for held-tomaturity and availablefor-sale securities.

Reversals of valuation
allowances on loans are
recognised in the income
statement.
IAS 39 Derecognition
of financial
assets
Combination of risks
and rewards and
control approach. Can
derecognise part of an
asset. No isolation in
bankruptcy test.
Partial derecognition
allowed only if specific
criteria are complied
with.
Derecognise assets when

transferor has
surrendered control over
the assets. One of the
conditions is legal
isolation. No partial
derecognition.
27
9/3/07
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Page 28
IAS/
IFRS
28
Topic
IFRSs
US GAAP
IAS 39 Use of partial- Permitted.

term hedges
for financial
items (hedge of
a fair value
exposure for
only a part of
the term of a
hedged item)
Although not explicitly

prohibited, these items
would most probably fail
the correlation
requirement of FAS 133
and hence not qualify for
hedge accounting.
IAS 39 Assume perfect Prohibited. Must

effectiveness of always assess and
measure effectiveness.
a hedge if
critical terms
match
Allowed if the critical

terms of the hedging
instrument and the entire
hedged asset or liability
or hedged forecasted
transaction are the same
Matched Terms
Method. Also allowed
for hedge of interest rate
risk in a debt instrument
if certain conditions are
met Shortcut
Method.
IAS 39 Application of
the effective
interest rate
method
Several differences exist between IFRSs and

US GAAP on this topic. Given the case-by-case
nature of such calculations, IFRSs and US GAAP
specialists should be consulted as and when a
comparative calculation is required.
IAS 39 Impairment of
debt and
equity
securities
Focus is on loss
events that provide
objective evidence of
impairment.
Impairment is recognised
only when the decline in
fair value is other than
temporary.
9/3/07
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Page 29
IAS/
IFRS
Topic
IAS 39 Use of basis

adjustments
for cash flow
hedges
IFRSs
US GAAP
Cash flow hedge of a

transaction resulting in
an asset or liability
gain/loss on hedging
instrument that had been
reported in equity
remains in equity and
transaction resulting
reclassified into earnings
in a non-financial
in the same period the
asset or liability
acquired asset or
choice of US GAAP or
incurred liability affects
basis adjustment.
earnings. Basis
adjustments prohibited
for cash flow hedges.
transaction resulting
in a financial asset or
liability same as US
GAAP.
IAS 39 Macro hedging Fair value hedge

accounting treatment
for a portfolio hedge
of interest rate risk is
allowed if certain
specified conditions
are met.
Hedge accounting
treatment is prohibited,
though similar results
may be achieved by
designating specific
assets or liabilities as
hedged items.
IAS 39 Written puts

over own
(treasury)
shares
Recognise a gross
obligation for the
present value of the
strike price.
Recognise a derivative
together with
subsequent changes in
fair value.
IAS 40 Measurement
basis for
investment
property
Option of
(a) historical cost
model (depreciation,
impairment) or
(b) fair value model
with value changes
through profit or loss.
Generally required to use

historical cost model
(depreciation,
impairment).
29
9/3/07
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Page 30
IAS/
IFRS
30
Topic
IFRSs
US GAAP
IAS 40 Property
interests held
under an
operating lease
Accounted for as
investment property
under IAS 40 if held
for investment and
if measured at fair
value with value
changes in profit or
loss. Otherwise
upfront payments
are treated as
prepayments.
Always treated as a
prepayment.
IAS 41 Measurement
basis of
agricultural
crops,
livestock,
orchards,
forests
Fair value with value

changes recognised
in profit or loss.
Historical cost is generally

used. However, fair value
less costs to sell is used
for harvested crops and
livestock held for sale.
9/3/07
1:09 pm
Page 31
Endnotes:
1
The differences may change once the final revised version of IFRS 3
(Business Combinations Phase II) (exposure draft released in June 2005) is
published.
The IASB is developing a comprehensive standard on accounting for rights

and obligations under insurance contracts that is consistent with the IASB
Framework definitions of assets and liabilities.
The joint IASB/FASB project has resulted in the IASB deciding to converge
with US statement FAS 131. IFRS 8 Operating Segments was issued in
November 2006. It is effective for the periods beginning on or after
1 January 2009, with earlier application permitted (may also be subject to
local endorsement processes). In advance of application of IFRS 8, IAS 14
Segment Reporting is the relevant Standard.
This issue is being addressed in the joint IASB/FASB project on Financial

Statements Presentation.
The FASB and the IASB are addressing some IAS 12 / FAS 109 differences in
their short-term convergence projects.
The IASB will retain substantively enacted but clarify that it means
virtually certain.
The IASB has a comprehensive project on leases on its Research Agenda.
A joint IASB/FASB project on revenue recognition concepts is underway.
The differences may change once the final revised versions of IAS 19 and
IAS 37 (exposure drafts released in June 2005) are published.
10 The IASB has been addressing elimination of this difference in its short-term
convergence project.
11 The differences may change once the final revised version of IAS 27
(exposure draft released in June 2005) is published.
12 The IASB has on its agenda a project on control including SPEs. This will
become a joint project at a later stage.
13 As defined by FAS 140 Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities.
14 As part of its convergence project, the FASB issued an exposure draft in
December 2003 that would eliminate these differences. The exposure draft
has not yet been finalised as a standard.
15 The FASB may address this in its short-term convergence project.
31
9/3/07
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Page 32
9/3/07
1:09 pm
Page 33
Deloitte IFRS resources

In addition to this publication, Deloitte Touche Tohmatsu has a range of tools
and publications to assist in implementing and reporting under IFRSs. These
include:
www.iasplus.com
Updated daily, iasplus.com is your one-stop shop for

information related to IFRSs.
Deloittes IFRS
e-Learning Modules
e-Learning IFRS training materials, one module for

each IAS and IFRS and the Framework, with self-tests,
available without charge at www.iasplus.com.
IAS Plus Newsletter
A quarterly newsletter on recent developments in

International Financial Reporting Standards and
accounting updates for individual countries. In
addition, special editions are issued for important
developments. To subscribe, visit www.iasplus.com.
IFRSs in your Pocket
Published in English, French, Spanish, Polish, Danish,

Finnish, Chinese, and other languages, this pocketsized guide includes summaries of all IASB Standards
and Interpretations, updates on agenda projects, and
other IASB-related information.
Presentation and
disclosure checklist 2006
Checklist incorporating all of the presentation and

disclosure requirements of Standards effective in
2006.
Model financial
statements
Model financial statements illustrating the

presentation and disclosure requirements of IFRSs.
iGAAP 2007
Financial Instruments:
IAS 32, IAS 39 and
IFRS7 Explained
3rd edition (March 2007). Guidance on how to

apply these complex Standards, including illustrative
examples and interpretations.
First-time Adoption:
A Guide to IFRS 1
Application guidance for the stable platform

Standards effective in 2005.
Share-based Payment:
A Guide to IFRS 2
Guidance on applying IFRS 2 to many common

share-based payment transactions.
Business Combinations:
A Guide to IFRS 3
Supplements the IASBs own guidance for applying

this Standard.
Interim financial
reporting:
A Guide to IAS 34
Guidance on applying the interim reporting standard,

including a model interim financial report and an
IAS 34 compliance checklist.
9/3/07
1:09 pm
Page 34
For more information on Deloitte Touche Tohmatsu, please access

our website at www.deloitte.com
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss
Verein, its member firms, and their respective subsidiaries and
affiliates. Deloitte Touche Tohmatsu is an organisation of member
firms around the world devoted to excellence in providing
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As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor
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18187 bd IFRS US GAAP

IFRSs and US GAAP

An IAS Plus guide

Audit Tax Consulting Financial Advisory

18187 bd IFRS US GAAP

Deloittes www.iasplus.com website provides comprehensive information about

18187 bd IFRS US GAAP

IFRSs and US GAAP

Road map for convergence 2006-2008

18187 bd IFRS US GAAP

The path to convergence

18187 bd IFRS US GAAP

Comparison of IFRSs and

Abbreviations used in this publication are as follows:

Cash generating unit

Financial Accounting Standard (US)

Financial Accounting Standards Board (US)

FASB interpretation (US)

Generally Accepted Accounting Principles

Generally Accepted Auditing Standards

International Accounting Standards Board

International Accounting Standard(s)

International Financial Reporting Standard(s)

Research and development

Securities and Exchange Commission (US)

Special Purpose Entity(ies)

End-note references indicated in superscript in the comparison table are

18187 bd IFRS US GAAP

Comparison of IFRSs and US GAAP

More principlesbased standards

Certain exceptions and exemptions at transition

Modified grant date

Use of historical Not permitted.

18187 bd IFRS US GAAP

Comparison of IFRSs and US GAAP

Balance sheet Focus on whether the

Acquisition date (date Within a reasonable

Acquisition date (if

18187 bd IFRS US GAAP

Comparison of IFRSs and US GAAP

Only if acquiree has

Can be recognised if the

Purchased inprocess R&D1

Determine the fair value

Allocate on a pro rata

Outside the scope of Pooling of interests

18187 bd IFRS US GAAP

Comparison of IFRSs and US GAAP

A component which may

Disposing entity should

Presentation of Post-tax income or

Pre-tax and post-tax

18187 bd IFRS US GAAP

Comparison of IFRSs and US GAAP

Exclude intangible assets.

Operating segments are

Specific line items

Certain standards require

One year comparative No specific requirement

18187 bd IFRS US GAAP

Comparison of IFRSs and US GAAP

Not directly addressed in

Non-current if the lender